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In the backdrop of the strike by workers of Neyveli Lignite Corporation (NLC),the Centre plans to initiate talks for a five per cent stake sale in the company through an institutional placement (IPP) programme to the Tamil Nadu government.

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The department of disinvestment has requested the Government of Tamil Nadu to nominate senior official for further discussions with Sebi with regard to its proposal, the finance ministry said in a release on Sunday.

This will be the first time a disinvestment in a central PSU will be subscribed to by a state government.

The move comes after Tamil Nadu Chief Minister J Jayalalithaa wrote to Prime Minister Manmohan Singh last month that the state was willing to buy the five per cent equity that is being divested from the Centre. The letter was forwarded by the finance ministry to market regulator Sebi for its opinion.

Finance minister P Chidambaram had last week said that the Central government would consider the Tamil Nadu governments offer.

Sebi is of the view that the stake sale can be covered under IPP but it must discuss the modalities of the proposal with all stakeholders  the Tamil Nadu government,the ministry of coal and the department of disinvestment.

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In the offer document for IPP,the seller can propose the criteria on the basis of which allocation could be made, the finance ministry said adding that this can be used to give preference to any set of qualified institutional buyers including state undertakings of Tamil Nadu.

The Cabinet Committee on Economic Affairs had last month cleared sale of 7.8 crore shares or five per cent of the Central governments equity in the public sector miner,in order to meet the minimum public holding norms.

Sebi has set a deadline of August 8,for all listed central public sector units to have a minimum 10 per cent public shareholding.

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The Centre currently holds 93.56 per cent stake in NLC. The disinvestment is expected to raise about Rs 455 crore at current prices. Shares of NLC on Friday closed at Rs 58.30 on the BSE. Employees of the company have been against the proposed disinvestment and around 30,000 workers went on an indefinite strike from June 30 over the issue.